China Is Cause for Optimism on World Economic Pickup, Swan Says

Jan. 14 (Bloomberg) -- China’s economic recovery is a sign
that global demand will improve this year, Australian Treasurer
Wayne Swan said ahead of a visit to Hong Kong where he will
speak today at the Asian Financial Forum.

“I’m optimistic that 2013 will be a better year for the
global economy,” Swan said yesterday in his weekly economic
note. “One cause of optimism is recent evidence that China’s
economy appears to be stabilizing after economic conditions
moderated in 2012.”

China’s exports rose more than forecast in December and a
broad measure of credit surged 28 percent, adding to signs that
the recovery in the world’s second-largest economy is gaining
traction. The nation’s new leaders are seeking to sustain a
pickup in growth after a seven-quarter slowdown.

Economic growth in China probably accelerated to 7.8
percent in the fourth quarter from a year earlier, up from a
three-year low of 7.4 percent in the previous period, according
to the median estimate of analysts surveyed by Bloomberg.

“The global economy remains hostage to two familiar
downside risks, the fiscal situation in the U.S. and the ongoing
sovereign debt crisis in Europe,” Swan said. Still “both sides
of the Atlantic have recently made encouraging progress in
dealing with these challenges.”

The U.S. reached its debt ceiling Dec. 31 and, without an
extension of the spending limit, the Treasury will exhaust
measures to finance the government as early as mid-February,
according to the Congressional Budget Office. Moody’s Investors
Service warned Jan. 2 that further measures to control the
deficit were needed to support the nation’s top Aaa rating.

More Work

“Uncertainty remaining around their debt ceiling,
unresolved spending cuts and the sustainability of their budget
in the long term means the U.S. has a lot more work to do to
restore confidence,” said Swan. “Anything less than a
comprehensive deal which addresses all these issues will have a
lasting impact on the global economy with substantial damage
having already been done.”

There is also a “burning need” for economic growth and
job creation in Europe, he said.

In Hong Kong, Swan will confer with Financial Secretary
John Tsang, and meet investors and Australian business leaders.
He will promote greater use of China’s currency in international
trade and finance before traveling to the U.S.

Australia’s economy received a boost in recent months as
the price of iron ore, the nation’s most valuable export, surged
to a 15-month high, reflecting expectations of faster growth in
China, which buys 74 percent of all ore exports.

Investment Boom

Australia is looking for a global recovery to sustain
exports and extend 21 recession-free years as a resource
investment boom is predicted to peak. It will continue to look
to growth in Asia as a means of boosting its economy, Swan said.

“As the economic weight of the world continues to tilt
toward Asia, we are in the box seat to take advantage,” he said.
“While Australia is in the right place at the right time, we
can’t assume a prosperous future will simply happen for us, so
we need to put in place the reforms that will ensure our economy
remains resilient.”

The government last month said it is unlikely to deliver a
pledged budget surplus this fiscal year as weaker growth and a
strong local currency curb tax receipts.

Prime Minister Julia Gillard staked her political
credibility partly on delivering the surplus, and abandoning the
target adds to pressure on her in an election year. Her Labor
Party had 32 percent support in a Dec. 10 Newspoll based on a
survey before the surplus target was discarded, while Tony
Abbott’s Liberal-National opposition attracted 46 percent.

Minority Government

Gillard, Australia’s first woman leader, heads a minority
government after winning the closest election in seven decades
in 2010, just three months after winning the prime minister’s
job in a party coup against predecessor Kevin Rudd. She ended
the year under attack over her work as a labor union lawyer 20
years ago, and countered by saying Abbott was trying to smear
her reputation, adding to signs of a tough campaign this year.

“Entering 2013, I’ve never felt more ready,” Gillard
wrote in a letter published in the Sunday Telegraph yesterday.

The government’s policy priority this year will be “a
giant leap forward in education” as well as focusing on support
and services to families, national security, implementing the
national broadband network for Australian homes and modernizing
infrastructure, she said.